The Office of Fair Trading (OFT) has moved to refer the UK's private motor insurance market to the Competition Commission, citing reasonable grounds for suspecting there are features of the market that prevent, restrict or distort competition.
The OFT provisionally found that insurers of drivers responsible for vehicle accidents _ otherwise known as 'at-fault' drivers _ have little control over the way in which repairs and replacement vehicles are arranged for the 'not-at-fault' driver.
Subsequently insurers of 'not-at-fault' drivers, brokers, credit hire organisations and repairers to manipulate the system; thus resulting in the cost of replacement vehicles and repairs being higher than they otherwise should be.
Clive Maxwell, chief executive of the OFT, said: "Competition appears not to be working effectively in the private motor insurance market.
"The insurers of 'at-fault' drivers appear to have little control over the bills they must pay, and this may be leading to higher costs for them and ultimately higher premiums for motorists.
"Having publicly consulted on our provisional decision, we are still of the view that there is no quick fix to these problems, and that a more in-depth investigation by the Competition Commission is therefore appropriate."
Retail Motor Law (RML) welcomed the move by the OFT in a bid to clamp down on insurers inflating their prices to the detriment of smaller companies and fleets.
Andrew Moody, managing director of RML, said: "I applaud the OFT for making this bold move _ it is good news for small businesses and consumers.
"It is hard to escape the conclusion that some major operators are throwing their weight around, inflating prices to the detriment of smaller companies and, ultimately, increasing costs to the motoring public via higher premiums."
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